Release Date: January 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Novartis AG (NVS, Financial) reported a strong financial performance for 2024, with a 16% increase in Q4 sales and a 29% rise in core operating income in constant currency.
- The company achieved a 12% sales growth and a 22% increase in core operating income for the full year, with a core margin reaching 38.7%, moving towards their goal of a 40% plus margin.
- Key products such as Entresto, Cosentyx, Kesimpta, and Kisqali showed significant sales growth, contributing to the company's robust performance.
- Novartis AG (NVS) has a promising pipeline with important approvals and submissions, including Kisqali for early breast cancer and Scemblix for CML, which are expected to drive future growth.
- The company is confident in its midterm guidance of 5% plus sales growth through 2029 and a 40% core margin by 2027, supported by strong in-market growth drivers and a deep pipeline.
Negative Points
- Novartis AG (NVS) faces potential loss of exclusivity for key products like Entresto in the US by mid-2025, which could impact sales and profitability.
- The company anticipates a modest headwind from Medicare Part D reforms, particularly affecting brands like Cosentyx and Kisqali.
- There is pressure on gross margins due to increasing royalties and potential generic competition, which may affect profitability.
- The competitive environment for products like Cosentyx is intensifying with new entrants, which could impact market share and growth.
- The delay in the Horizon Phase 3 trial for pelacarsen due to event rate dynamics raises concerns about the timeline for key pipeline readouts.
Q & A Highlights
Q: Can you elaborate on how Novartis plans to offset the impact of Entresto's loss of exclusivity in Europe on the P&L and top line?
A: Harry Kirsch, CFO, explained that the company expects mid- to high single-digit sales growth due to strong growth brands and launches. Despite Entresto's loss of exclusivity, Novartis is confident in achieving moderate margin increases through resource allocation and productivity programs. The focus is on maintaining sales growth and managing the impact of generics in the second half of the year.
Q: How resilient is Novartis' gross margin in light of Entresto's potential loss of exclusivity?
A: Harry Kirsch noted that while there might be some pressure on gross margins due to increased royalties from new products, this will be offset by SG&A efficiencies. The company expects to maintain strong productivity programs in manufacturing and supply chain to manage costs effectively.
Q: What makes Novartis confident in its Huntington's disease program given past failures in the area?
A: CEO Vasant Narasimhan highlighted that the goal is to reduce mutant Huntington protein by 30-50% without adverse effects. The interim results from PTC's Phase 2 study showed relevant mHTT lowering and clinical efficacy signals with a good safety profile. The focus is on achieving a clinical benefit that could lead to regulatory approval.
Q: Can you confirm the contribution of favorable gross-to-net adjustments to sales in Q4 2024?
A: Harry Kirsch confirmed that about 3 percentage points of the 16% sales growth in Q4 were due to gross-to-net true-ups from prior quarters. The underlying growth was 13%, and the full-year sales for 2024 are considered undistorted.
Q: How does Novartis view the impact of Medicare Part D reform on its growth outlook?
A: Vasant Narasimhan stated that the company expects a modest headwind from Part D reforms, which has been factored into the guidance. The reforms primarily impact Cosentyx and Kisqali, but Novartis anticipates managing these effects within its growth projections.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
